Credit card debt is one of the most expensive types of debt. Interest rates may rise and your balance starts to strengthen if you do not pay it to the end of the billing cycle. A 35 -year -old man has been first hand and is now planning how he will pay $ 21,000 in credit card debt.
“I have no other emergency funds or savings except my 401 (K),” he explained.
The debt is divided by three credit cards, each increasing $ 7,000. He earns $ 700 each month, but has recently saved $ 5,000. After all costs, it has no $ 5,000, but only $ 1,000 a month.
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Redditor received proposals for debt snowball and debt avalanche methods. The debt snowball method means that you first have to pay the lowest balance and gradually cancel your debts. Then you have to worry about less payments.
The debt avalanche method includes a priority for credit card debt with the highest interest rate. This method allows you to save more money and a snowball debt for psychological purposes.
Each person who advocated the method of debt snowball or debt avalanche recommended that you put $ 5,000 in a single credit card balance instead of spreading it on all three credit cards. One Redditor thought it made sense to include all $ 5,000 on a credit card and the other suggested that you remain $ 1,000 to make minimum monthly installments.
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In any case, one of the credit card residues will be reduced from $ 7,000 to $ 2,000 or $ 3,000, making it easier to pay off. The debt avalanche method makes it more meaningful because all three credit cards have the same balance. First, get rid of the card with the highest Apr.
A 35-year-old can review his finances and see how $ 5,000 a month turns into $ 1,000 a month. There may be several unnecessary costs and impulse costs, but this is more likely to be an income problem. In this case, the 35-year-old should get a second job for a short time.
Whether it is not a full -time work or a side bustle, it is important that you put extra money every month in the original poster. It does not necessarily have to be permanent, but after the second source of income, it will remove it from debt soon. He can pay one of his credit cards within two months if he can get another job.